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What is Productive sector lending? How does it contributes in national economy?

September 20, 2018

Productive sectors are the real sectors of the economy. Sectoral components of GDP such as agriculture, industry and services are the productive sectors. It reflects the viable, creditworthy picture of an economy emerging. Investment on the productive sectors has been a main focus of the government thus to stimulate economic growth and generate income and employment opportunities. The central bank policy directs the banks to increase their lending to productive sector by 25 percent.

Despite dismal lending demand from the growth accelerator agriculture, a deliberate focus on the agriculture sector by both government and central bank with rapid agriculture insurance implementation helps boost lending. However, the lending idea and decisions are still in bleak for many Banks/FIs due to the lack of the nature of business and inherent risks occupied by such sectors.

Productive-sector lending is mandatory, but is hurdled in many ways mainly because of lack of qualified human resources. The bank officials also lacks technical expertise and know-how of the nature of business, its performance and success stories which is making Banks/FIs fearing to invest.

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